For floating-rate Treasuries, though, the real question is just how much of a premium they would command over simply owning and rolling over successive investments in short-term Treasury bills. With two-year Treasuries yielding just 0.25% and even five-year securities carrying yields well below 1%, it’s hard to see a spread of more than half a percentage point or so unless the Treasury issues longer-term floating-rate notes. As a result, these securities are likely to look pretty unattractive even in comparison to low-yielding conventional Treasuries.
Still, with interest rate risk being the primary problem for Treasury investors, floating-rate bonds would resolve concerns about higher rates. Just as TIPS were slow to take off but eventually gained favor once investors got more familiar with them, so, too, might floating-rate Treasuries fill a need that will grow in the coming years.
The article Finally, a Bond That Might Be Worth Buying originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford and General Electric.
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